VAT at £90,000: Rewriting Your Cleaning Quotes Without Losing the Job

Ask any cleaner who has been through it and you'll hear the same story. The year they registered for VAT was the year the work stayed the same and the money got thinner. Not because clients vanished, but because a fifth of every invoice suddenly belonged to HMRC.

VAT is not a tax on profit. It's a tax on the money that passes through your business, collected from your clients and forwarded on. For a trade with thin margins and a lot of labour, that distinction matters enormously.

How the threshold actually works

The registration threshold is £90,000 of taxable turnover. It is not measured over your financial year or the tax year — it runs on a rolling 12-month basis. If your taxable turnover across any 12-month window goes over £90,000, you have crossed the line.

There's also a forward-look test. If you expect to breach £90,000 in the next 30 days alone, you need to register then and there. This is the one that catches people out, because it usually arrives alongside a good thing: a big contract win, a commercial client with a large site, or a price rise that finally pays off.

A few things people get wrong:

• Zero-rated and reduced-rated work still counts as taxable turnover.
• Most cleaning income counts, whether it's domestic, commercial, end of tenancy or window work.
• Selling a business asset outside the normal course of trade generally doesn't count.
• You must tell HMRC within 30 days of the end of the month in which you went over. Miss it and the penalties start.

There's also a deregistration threshold of £88,000, which gives you a small buffer if turnover dips — but that's a different conversation to the one about whether dropping under is a good idea.

What registration does to a £25 an hour quote

Here's the bit that confuses people: your quote hasn't changed, but your income has.

If you invoice £25 an hour including VAT, you now keep £20.83 and send £4.17 to HMRC. Your client pays the same as before. You take home a sixth less on every hour.

Or you quote £25 plus VAT, which is £30 to the client. Your income is unchanged, but your price has just gone up 20% in a market where plenty of competitors are still under the threshold and quoting £22.

Either way, someone absorbs it. The question is who.

A worked example: the £95,000 year

Picture a cleaner turning over £95,000, mostly domestic work at £25 an hour including VAT, delivering around 73 hours a week between themselves and one part-timer.

Before registration, they bank £95,000.

After registration, if they hold prices where they are:

• Gross invoiced: £95,000
• VAT payable to HMRC: £15,833
• Revenue left: £79,167
• Reclaimable VAT on cleaning products, fuel, equipment and uniforms: roughly £1,200
• Actual income: about £80,370

That's a shortfall of around £14,600 a year. Nearly £280 a week, gone, without a single client leaving.

To restore that income by putting prices up, they'd need to invoice around £114,000 — a 20% rise, taking the hourly rate from £25 to £30. Some clients will accept that. Plenty won't, particularly in a domestic market where £25 is already mid-range.

So the alternative is volume. To claw back £14,600 of income at the same rate, they need roughly 700 extra hours a year — about 13 and a half hours a week more cleaning. They'll be busier, more tired, and no better off than they were before April. That's the trap. VAT punishes the business that grows by doing more of the same.

The three real options

Absorb it. Rarely the right answer, but sometimes the only one in the short term while you reprice contracts at renewal. Do the maths first and know exactly what absorption costs you, so it's a decision rather than a drift.

Reprice in stages. Rather than a 20% jump, take 8% at registration and another 6–8% at the next contract renewal. Domestic clients handle two smaller increases far better than one big one. Give notice in writing, explain the reason plainly, and be ready to lose a handful of price-sensitive jobs — the ones that were probably marginal anyway.

Stay deliberately under. Perfectly legal to run a smaller business. What isn't legal is splitting one business into two shells to dodge the threshold; HMRC can disaggregate those. Turning work away to stay under is a commercial choice. Creating a second company to hold the same clients is not.

What to say to domestic clients

Keep it short and human. Something like: 'From 1 April I'll be VAT registered, so my hourly rate moves from £25 to £28 including VAT. I've held it as low as I can — it's roughly what a 20% VAT charge costs on the old rate. I'd love to keep you on, so let me know how you'd like to proceed.'

Some will go. The ones who stay are usually the ones who value reliability over the cheapest quote, and those are the clients you want in a business that now has to file quarterly returns.

Commercial clients are a different conversation

Most commercial clients are VAT registered and reclaim what they pay you, so 20% is close to neutral for them. Quote ex-VAT, state 'plus VAT' clearly on every document, and make sure whoever signs the contract understands the total. Don't bury it — an unexpected 20% on an invoice is how good relationships go bad.

Cash flow: the money isn't yours from day one

The day you invoice, that VAT belongs to HMRC in practical terms. Open a second bank account and move the VAT element across as each invoice is raised. You'll also need MTD-compatible software to keep digital records and file quarterly returns.

Two useful reliefs worth asking an accountant about: you can usually reclaim VAT on services bought in the six months before registration, and on goods you still hold that were bought up to four years before, provided they're for the business. That can be a few hundred pounds back on equipment and supplies.

The Flat Rate Scheme looks tempting, and there is a cleaning rate to check on HMRC's table — but be careful. Businesses with low goods costs relative to turnover often fall into the 'limited cost trader' category at 16.5%, which can leave you worse off than standard accounting. Run the numbers before you sign up.

The bottom line

Hitting £90,000 isn't a failure and it isn't a finish line. It's a structural change to your business that deserves a proper afternoon with a spreadsheet, not a panicked phone call in the month the letter arrives. Work out your real post-VAT income now, plan the reprice before it lands, and you'll keep the growth you worked for.